USA vs China continued… The Influence of Networks (and the Olympics!)

The last three Olympics have seen a titanic battle between the US and China to head the medals table. If you combine the total of the last three Games, China stands just ahead, with 121 golds to the United States’s 116. But, the US topped the table in both 2004 and 2012, while China edges ahead because of its massive haul in Beijing.

Is this a portent of the wider struggle for global hegemony in the twenty-first century? Just 20 years ago in Barcelona, the US was well ahead – with 37 golds to China’s 16. The Chinese have caught up. Or so it seems.

Building a team for success is a major challenge, and I have massive respect for those behind the triumph of Team GB. But, from an organisational perspective, it is simple. The aim is unequivocal – to win. The methods are well known – just look at Mo Farah’s brutal training regime. To succeed in distance running, an absolutely punishing routine is needed.

The same can be said for the transition China is making from a peasant to an industrialised economy. The goal is clear. The way of achieving it is well understood, as many countries have already gone through the same process. But how do you move beyond this to create a successful post-industrial economy?

We have been here before. The old Soviet Union used terror, iron discipline and massive inequality to build an industrial economy. It succeeded. But it had no idea of how to move beyond this, to the complexities and subtleties of an information-age economy.

It is easy to make a case for US weakness. Its twin deficits, in balance of payments and its government accounts, stand alongside an increasingly divided and embittered policy discourse.

But in terms of its ability to innovate in a complex globalised society, you only need to witness the spectacular success stories of the past 30 years. Microsoft, Google and Facebook are all American.

The networks which make up American society are fluid and dynamic. They have the sorts of structure that both encourage innovation in the first place, and stimulate its widespread adoption.

The network of government, the network of companies, the network of universities, all of these are strongly coupled to one another. The US has learned how to make public-private partnerships work, not by reams of turgid legal contracts, but by honing the structure of connections between these three crucial sectors of the economy.

In contrast, the networks of Chinese society are much more rigid and hierarchical. The Communist Party is the prime example. But Chinese culture in general is far more inclined to defer to authority, and to the established wisdom.

The twenty-first century will belong to those who are best at technological innovation. The open, fluid and dynamic structure of the networks of American society put the US still in prime position.

The Volterra Blog

The Volterra Team is made up of a vibrant mix of economists and mathematicians - this blog is their chance to air their opinions of recent economic news and developments. As in the best of discussions - opinions will differ - so do comment and let them know your point of view!

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